If you are into weight training, you know that if you want to increase muscle mass and strength, you must lift heavy. Heavy to a point of discomfort. Heavy to a point of pain. Not that I would know but that is what I’ve heard. The same applies to investing. You must be willing toContinue reading “Growth Comes With Discomfort”
Reserves
Reserves as in safe. Reserves as in accessible. Reserves as in durable. There is nothing safer than cash. There is nothing more accessible than cash. And if done right, there is nothing more durable than cash. And by done right means that the quantity of reserves matches the duration required of those reserves. For most,Continue reading “Reserves”
Yield Curves
Say someone you know is running short on funds and comes to you for a loan that he promises to pay back in a month. Will you lend him the money? And if so, would you do it for free? You’d say why not. You have loaned him money before and without fail, he paysContinue reading “Yield Curves”
Equity Risk Premium
A widely known way to value a stock is its price to earnings ratio. It tells us what investors are willing to pay for each dollar of profit a business behind that stock earns. The other way to look at that same information is by flipping that ratio upside down. That is, earnings divided byContinue reading “Equity Risk Premium”
Perspectives
A wise woman once said that when in doubt, zoom out. So zoom out I did. This is what a 40-year chart of Dow Jones Industrial Average looks like… Add in reinvested dividends and we are looking at an easy double of that. Or if you want to get exotic, here is what the IndianContinue reading “Perspectives”
Mind That Concentration Risk
Rule number one – don’t lose money. Rule number two – don’t forget rule number one. That of course is classic Buffett. So, say you have a choice between investing in the hottest tech stock around or in a basket of stocks that represent say the entire tech sector. Which one do you think offers aContinue reading “Mind That Concentration Risk”
A Pension Plan Of One
How long are you going to live? Average life expectancy today for a typical American is about 80 years. And it is somewhat distributed like this… It is skewed left because some unlucky few will lie on the extreme left of the distribution, a major chunk will live close to the average and some toContinue reading “A Pension Plan Of One”
Annuities – Directionally Right But Mostly Wrong
Annuities are insurance products. And insurance is an expense. It is never an investment. What do you get for that expense? Risk reduction (definition of insurance) but above all, peace of mind. You buy life insurance to protect your loved ones from financial ruin in case you unexpectedly pass away. There is an insurable needContinue reading “Annuities – Directionally Right But Mostly Wrong”